Hong Kong and China: reconciling the economic incongruities

Having been writing, seemingly forever, on professional matters and wider economic issues, it’s time for a refreshing break – for me at least.

I am writing on the high seas, visiting many fascinating places – Guam, Papua New Guinea, the Great Barrier Reef. But the most intriguing are Hong Kong and China. I shall say something about the contrasts and incongruities.

“Buddhist? Catholic? I am now a businessman!”

In Hong Kong money is god. “Buddhist? Catholic? I am now a businessman!” was overheard in response to a tourist’s question.

Despite its limited space – 420 square miles – it is an unstoppable commercial steamroller. Yet before 1997, when Britain’s 99-year lease expired and Hong Kong reverted to Chinese ownership, trepidation about its future was intense.

Fears for an uncertain future

Would China, inscrutable as ever, impose penal taxes? Seize control of companies? Many great commercial houses and banks moved headquarters to jurisdictions such as Bermuda or London. The world’s most overtly successful capitalist enclave and its new owner, the world’s most regressively domineering opponent of free enterprise, free thought – free anything – were entering a shotgun marriage of inconvenience, with wholly unpredictable consequences.

They need not have worried. There have been no new taxes, no forced state acquisitions. Cars still drive on the left. The very reverse of what was feared has happened. Chinese mothers-to-be pay large sums to have their offspring delivered in Hong Kong for the benefit of its passport. Over 80% of the 27 million visitors to Hong Kong each year come from mainland China. Authoritarian Chinese intransigence begins to melt. Shanghai, with its skyscrapers, shopping malls and bustling riverside life, now rivals Hong Kong as a centre of economic power and all that goes with it – swinging night life, international hotels and cutting-edge industries.

In 1978 Deng Xiaoping ushered in the “Social Market Economy”. Under Mao’s Cultural Revolution drugs, gambling and prostitution had been brutally stamped out. When Deng was asked why, under his “open door” policy, they had all returned, his laconic reply was “When you open the window to let in some fresh air, the flies come in too”.

The tendency toward equilibrium seems inexorable. Some catalytic factor enters to give a sense of freedom, from which moment it is unstoppable – as with the collapse of the Berlin Wall and the ending of apartheid. Similarly, indulgence and excess lead to breakdown, even poverty, before equilibrium is restored and growth resumed (as we now know!). Ancient Rome was plagued by greed, plundered wealth, rigid class divisions and a corrupt dynastic rulership that reaped its own destruction. Imbalance is met by counter-balance. It happened in France and Russia.

Ruling party members in Beijing, watching developments apprehensively, appear to recognize the inevitability of this process. The surging growth of China’s affluent middle class will in time overcome official attempts to restrict media, telecoms and internet access, and there will be no holding it.

Land – the link

Despite glaring differences, the way in which ownership and control of land is managed in their respective countries gives the real clue to their reconciliation. This is ironic since all the land of China is state-owned, whereas in Hong Kong it continues to be privately owned.

Indeed, the familiar Hong Kong skyline unwittingly, but accurately, depicts a bar-chart of the value of its land in ownership of some of the worlds super-rich. China’s phenomenal commercial growth would obviously have been inconceivable without access to land, and ruling party officials have acquired undreamed of fortunes through the process of issuing leases on plum sites in all main centres.

So, two systems with one outcome: a super-rich oligarchy, a burgeoning wealth-generating middle-class and a forgotten 70 per cent who, in Hong Kong, live on boats or farm the New Territories, and in China work the land, toil in factories or serve in towns, incommunicado and overlooked.